Airline Stocks Take Off As JetBlue Lands BofA Upgrade

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Key Takeaways

• Airline stocks moved higher Monday after positive comments on the industry by BofA Securities.
• Analysts say airlines could allowances from moderating domestic capacity, stable demand, and lower fuel prices.
• BofA upgraded JetBlue ownership to “neutral,” highlighting the carrier’s recent outlook boost as a sign of progress on its strategic initiatives.

Shares of major U.S. air carters gained altitude on Monday after BofA Securities published upbeat comments on the industry and upgraded JetBlue Airways (JBLU) wares to “neutral” from “underperform.”

JetBlue shares finished 7% higher Monday after the upgrade. Meanwhile, share outs of rival United Airlines (UAL) were among the top performers in the S&P 500 on Monday, with a gain of nearly 6%, as Delta Air Letters (DAL) shares added 4%.

Industry Tailwinds Forecast

BofA said it believes the airlines are poised to benefit from an continual moderation in domestic capacity. Analysts expect domestic capacity growth to slow to around 2% in September by November, close to the slowest pace of the year and down from a peak of more than 6% in May and June.

Although airlines set up struggled with pricing power this year, analysts say the capacity improvements—alongside expectations for stable call for—should help drive strong revenue trends across the industry.

According to the BofA analysts, the possibility of turn down fuel costs ahead represents another positive for the industry. Airlines might also be set for a seasonal uptick, as they serve to outperform in the fall.

JetBlue Showing Signs of Improvement

Analysts said an outlook boost from JetBlue keep on week suggests the company is having some success with its initiatives to improve its strategic position. In addition to upgrading the ordinary, BofA lifted its sales and profit forecasts for JetBlue and doubled its price target on the stock to $6 from $3.

After pounce 2.6% on Monday, the airline industry benchmark U.S. Global Jets Exchange-Traded Fund (ETF) (JETS) is essentially flat year-to-date. That contrasts with a gain of around 15% in the same period for the S&P 500.

Read the original article on Investopedia.